Medvedev Orders Gazprom to Limit Belarus Gas After Talks Fail

By Ilya Arkhipov

June 21 (Bloomberg) -- Russian President Dmitry Medvedev ordered OAO Gazprom to reduce gas supplies to Belarus, which carries about 20 percent of Europe-bound exports of the fuel, this morning after talks over a gas debt failed, said a Kremlin official, who declined to be identified.

Gazprom Chief Executive Officer Alexei Miller said June 18 that Belarus had until today to pay a $192 million gas bill or lose as much as 85 percent of its Russian supply of the fuel. Belarus's counterclaims that Gazprom owes transit fees is an attempt to create an "offsides," he told reporters at the time in St. Petersburg.

Relations between Russia and Belarus are souring as a customs union yoking the two countries and Kazakhstan falters. Belarusian Premier Sergei Sidorsky boycotted a meeting with his Russian and Kazakh counterparts, Vladimir Putin and Karim Masimov, last month. Putin, who announced the union last June, has said the troika will miss the July 1 deadline and cited Belarus's push for continued subsidized energy as a stumbling block in talks.

Putin said in March that Belarus will receive $4.2 billion in Russian subsidies this year through lower-than-market gas prices and tax-free oil deliveries. Gazprom also paid $625 million this year for 12.5 percent of Beltransgaz, the Belarusian gas pipeline company that transports about 20 percent of Russia's Europe-bound gas exports.

Gazprom spokesman Sergei Kupriyanov said on May 28 the company won't cooperate with Belarus until it pays its debt, which may swell to $600 million by the end of this year.

--Editors: Torrey Clark, Alex Nicholson

To contact the reporters on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net;

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net